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Semi Shorting: Double digits turn up and inventories down


This has been an up week for the tech sector on Wall Street as reactions lead to gains based on upward guidance from a handful of the semiconductor industry's analysts and bell-weathers.  But the news from around the major foundries and manufacturers was not just food for the investors, there is real news for the industry here with important implications for the rest of 2009 and beyond.

While the bottom has mostly been conceded for the semiconductor industry, there are still some concerns that recent demand may not be more than the result of the gregarious pull-backs to cut inventory a few quarters ago - as has been noted regularly in this commentary space.  But the numbers coming from foundries, manufacturers, and semiconductor suppliers are all pointing to the more typical, cyclical, high single-digit increases quarter-over-quarter (QoQ) for Q2 and Q3E.  Utilization rates are coming back to normal ranges.  TSMC, among others, are hiring back their employees 'permanently', citing a real end to the cut backs, and some customers of major fabs are being put on allocation, according to EETimes, EETimes Europe, and DigiTimes, during the past week. 

The major analysts, iSuppli, IC Insights, WSTS, all seem to point in a similar direction, that the fab uptick in utilization levels is a signal of a healthy 2H09 and certainly a more normal year-long cycle and growth range for 2010. While the present numbers are not inherently positive, for most companies the trend is up QoQ, but still down YoY.  The general consensus is that the worst is over and a real gear up is under way; thanks in no small part to the aggressive inventory management and utilization slashing that occurred thus far.  

Let the expansions begin - but don't expect to see pre-2008 level CAPEX spends for a while.

Lisa Ann Cairns, Ph.D.
Written on Wednesday, 10 June 2009 00:00 by Lisa Ann Cairns, Ph.D.

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